1990 (3) TMI 180 - AT - Central Excise

Summary

Issues:
1. Whether the appellants are independent manufacturers or manufacturing on behalf of another entity.
2. Whether the Show Cause Notice issued to the appellants is barred by limitation.

Analysis:

1. Issue 1:
The appellants contended that they are independent manufacturers and not manufacturing on behalf of M/s. Lions Pencils Pvt. Ltd. They argued that they have their own factory, industrial license, and maintain their own records, establishing their independence. The Tribunal noted that both entities are independent, with separate identities and management. The appellants utilize raw materials supplied by M/s. Lions Pencils to manufacture pencils, creating a new product. The Tribunal referred to previous judgments and held that the appellants are indeed independent manufacturers liable to pay duty on the pencils they manufacture.

2. Issue 1 Contd.:
The Tribunal further explained that the assessable value for duty calculation includes the value of raw materials supplied, job work done, manufacturing profits, and expenses. The duty payable is based on this assessable value, as per legal principles established in relevant cases. The Tribunal distinguished a previous case where the status of a manufacturer was considered that of hired labor, emphasizing the independence of the present appellants as manufacturers.

3. Issue 2:
Regarding the limitation of the Show Cause Notice, the appellants argued that the notice was barred as per exemption notifications and lack of suppression of facts. The Notice alleged that the appellants manufactured pencils on behalf of M/s. Lions Pencils based on certain circumstances. However, the Tribunal cited a Supreme Court judgment that indicated the appellants were independent manufacturers. As there were two possible legal inferences from the facts, the Tribunal held that the department could not invoke a larger period of limitation. The Asst. Collector was directed to calculate duty based on a specific period prior to the Notice issuance, following the Supreme Court's principles.

In conclusion, the Tribunal ruled in favor of the appellants, declaring them as independent manufacturers liable to pay duty based on the assessable value. The Show Cause Notice was deemed not barred by limitation, but the duty calculation was limited to a specific period.